Dow Leads Broad Market Higher, Gaining 119 to Cross 11,000 Mark

Investors’ optimism that interest rates have peaked helped drive the Dow Jones industrial average above 11,000 on Friday, for the first time since April.

But the technology-heavy Nasdaq composite index lagged, as investors hammered Dell Computer on worries about slowing sales growth.

The Dow surged 119.04 points, or 1.1%, to close at 11,027.80, its highest since it finished at 11,124.80 on April 25.

Rising stocks outnumbered losers by more than 2 to 1 on the New York Stock Exchange, though trading volume was low--typical for a dog-day Friday in August.

Most other broad indexes also gained Friday, with the Standard & Poor’s 500 up 0.8% and the Russell 2,000 small-stock index up 1.7%.

The Nasdaq composite, dominated by major tech stocks, added 29.48 points, or 0.8%, to 3,789.47, failing to advance much further after a morning rally.

More telling was that rising stocks outnumbered losers by 21 to 18 on Nasdaq, a far narrower edge than on the NYSE.

Investors got good news Friday in the form of the July wholesale inflation report, which showed that prices overall were held in check last month.

However, a report on retail sales in July showed greater-than-expected strength, which gave the bond market pause after a strong rally in recent weeks that had driven long-term Treasury bond yields to their lowest levels of the year.

The 2-year Treasury note yield bounced up to 6.26% Friday from 6.16% Thursday. The 10-year T-note rose to 5.79% from 5.77%.

Still, “There is the feeling that interest rates have peaked,” said Barry Hyman, chief market strategist for Ehrenkrantz King Nussbaum Inc. “That scenario gets more solid every day. That’s an excellent environment for stocks.”

The Federal Reserve meets on Aug. 22, and many economists believe the central bank will leave its key short-term interest rate unchanged, satisfied that the economy is showing enough signs of slowing, and that inflation is in check.

Optimism about rates helped drive financial and industrial stocks higher on Friday, building on a rally earlier in the week.

For the week the Dow rose 260.05 points, or 2.4%, while Nasdaq added just 2.11 points, or 0.06%.

The tech sector was weighed down Friday by Dell, which slid $4.06 to $37.69 in the wake of its earnings report on Thursday, which showed slowing sales growth.

That refocused some investors on the risk that technology companies’ sales and earnings are vulnerable to a slowing economy.

The Internet sector was particularly weak. The Interactive Week index of 50 Net-related stocks slipped 0.3%, even though Amazon.com jumped $3.25 to $33.69 following its announcement this week of a venture with Toys R Us.

Among major tech stocks, Intel gained $1.81 to $63.81 and Oracle rose $1.06 to $81.13, but Microsoft eased 19 cents to $72.44 and Nortel Networks slid $2 to $76.

Among the hottest stocks on Friday were financial issues, especially brokerages. Morgan Stanley Dean Witter jumped $5 to 101.63 and Charles Schwab gained $1.94 to $39.

Banks also gained, as did insurance firms such as Progressive, up $2.94 to $73.88.

Home builders’ stocks also surged on optimism about mortgage rates. Kaufman & Broad jumped $1.44 to $24.56.

Among the sectors helping push the Dow index higher were tobacco and drugs. Philip Morris rose $2.75 to $31.25 after positive comments by an analyst at Goldman Sachs.

In the industrial sector, Dupont jumped $2.50 to $49.38, GM gained $1.63 to $63.25, Toro leaped $2.88 to $30.13 and Emerson Electric surged $2 to $69.25.

Among smaller stocks, many biotech shares rebounded, lifting the Amex biotech index 3.3%. Amgen rose $1.75 to $69.69 and Biogen jumped $3.13 to $66.

Utility stocks resumed their rally, pushing the Dow utility index up 0.7%.

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Market Roundup: C4